30 year fixed mortgage under 4%? ARMs under 3%?

Arms under 3?

But it is still difficult to get loans. I have a 6.7 % 30 yr fixed jumbo w/70% LTV that I would like to refi. To refi into another 30 yr is not such a great deal --only about 1% lower rate because no one wants to take on the risk of 30 yrs. And, I would have to do 65% LTV w/ an 8% lower appraisal value. So not really much incentive. To take a 7/1 yr arm is better -- 4.25% max but LTV is then 60%. Plus there are fewer mortgage brokers so mort broker (says) is not negotiable of his fee (!%). Plus closing costs (1%) plus loss of return on increased cash outlay plus loss of tax deduction. Cash flow up front is great and I'm sure many are jumping into the pool. But diminishing value over the years particularly if you get shafted after 7 yrs.

Mostly it is a sea change that keeps me from going forward. I have had at least 10 mortgages. Every one a 30 yr. Being forced into a 7 yr is weird. Plus most ads are for 5 yrs w/ good rates. Also saw a slew of ads for no docs, interest only, etc. I have a feeling the whole universe will convert to 5/1 yr arms and we will have a slight blip up -----until the 5 yr arms are up and then armageddon all over again. Every broker-- and many banks -- are pressing for a 5 yr. Are we kicking the can down the road. Personally, a 5 yr makes much more sense to me short term. But the risk is great to assume prices will be higher and you will be able to sell in 5 yrs. Is the entire industry kicking the can down the road by pressing for 5 yrs?

apt23 - not sure why another 30 year mortgage wouldnt make sense even with just a 1% reduction in rate. Here is how I make the case on whether a refinance makes sense or not. Not sure how much you owe but let's say you have a jumbo mortgage of 1M at 6.7%. That would give you a monthly mortgage of $6452. If you lowered your rate 1%, your payments will be reduced to $5804. That's a $648 monthly savings. Now there are costs involved with refinancing. Assuming it is 1% as you mentioned, it would take you a $648 monthly savings for about 15 months to recoup your cosing costs. If you know you will be keeping the property for more than 15 months then you'll break even. Every year after that you save $7776 on a yearly basis. So depending on how long you plan on keeping the property, it can actually be a good deal. Also, on top of that, if you just applied the $648 monthly savings to your principal payments, that would reduce your loan term about 6.5 years and save $275k over the life of the loan. But I realize most people dont keep they mortgage for 30 years. Just my thoughts.

Regarding the ARMs, not a big fan unless the borrower is absolutely sure of his/her plans. If a borrower is looking to sell within a couple of years no matter what and wants to get into a 5/1 ARM, then it can make sense. Of course, there is the "what if" factor. Like, what if the property doesnt sell in 5 years. But I think ARMs are a good product for the right person.

sunny.hong@bankofamerica.com

shong: do you do mortgages in Miami Beach? It is a 1.1 m mortgage but would have to put down more cash to cover LTV difference on lowered appraisal. So, would have to throw in another $243 K which is not a problem,. But everyone is pushing the arms, so I'm lookin at them.

point is, for everyone who needs the cash flow, they have to be jumping at 5/1 arms. those loans are literally being pushed. I wonder if that will create another problem 5 yrs down the road when they reset.

apt23: yes, we do mortgages in Miami Beach. However, it depends on the type of property. Condos are a big concern and likely will only finance Fannie Mae approved condos.

It certainly is a concern with a lot of 5/1 ARMs being pushed because 5 years from now it may be trouble.

Apt23, the correct comparison is to run the scenario with just prepaying $243k on the $1.1mm. Or looking at putting in $243k to get into a lower interest 30yr fixed loan, and all the fees linked to it. Under that scenario, I'm willing to be it'll take more than 15 months to negate the fees.

One other thing, I've noticed life quality items in the world are tremendously on sale. Safaris in Africa, trips to Tahiti, 4seAsons hualalai, cars, boats, fishing expeditions...... If you harbor any desire to do any of these things, and can comfortably count on income, I'd do the 50% off trades first, not the 100bp swing in mortgages. And when you pull the NYC re trade, an additional $243k in cash may be worth alot more in terms of negotiations than your ir savings. IMHO.

apt23, what about a 15? Usually the same rate as a 7/1 and banks are much more willing to do them. LTV may be higher as well. Depending on how much more you are willing to put towards the equity, you could probably lower your payment and chop 15 years off the mortgage.

shong, what are you pricing jumbo 15's at these days?

Juiceman you know you can create a 15yr mortgage from a 30 anytime, right? The value option of a 30yr is huge. Only lemmings who can't budget or can't earn more than their mortgage go into a 15. I ask you if you do 30yr and can fund 401k, or 15 and not fund 401k, which is better?

w67: you should write a book. Seriously, people are playing with RE fire & are getting burned. I think you not-so-gentle views are needed & would be appreciated.

I get what you are saying w67th but apt23's current rate is 6.7%. The difference between 30 and 15's are no longer linear (jumbos specifically). With a 15, apt23 could probably get 200 bps + on his rate and wouldn't have the concerns he has with an ARM. Banks are generally less stringent with a 15 from a LTV perspective as well. It is true that you can create a 15 from a 30 anytime, but not with a 15 rate and not without 30 yr conditions. Using shongs example above, a 15 at 4.5 with $150k more in equity ($850k) would break even from a monthly payment perspective and lop 15 years off the loan. Not a bad deal, even for a lemming.

Thanks W67, shong, juice. Yes, my excel page is burning up. Juice the 15 yr is not for me. I was looking to free up some monthly cash so I could invest it in the apt --juicing it up as an upscale rental. The 30 yr is probably the path for me. Conservative bet has won big for me and I'm gonna stick with it. But that 5yr monthly is pretty sexy -- I bet many, many are seduced. We should all prepare for the fall out 5 yrs down the road.

Though i never tallied the paydown of 243K in my excel. Thanks 67 that will be interesting. I'm not leaning towards any pay down cause I live in a hurricane path. If the bank and I ever have to share some carnage, I'd like us to be partners. And, even though when I bought it, I thought we would flip it in 5-7 yrs., the place is so fabulous we might just keep it and rent it out for many years.

W67, give up the boat. Come down to miami with the kids, pick up a beach condo in a fire sale and live like a king. i can direct you to a great short sale. your kids will love it.

Apt23 i would be interested. Can you email me. Ekartash@mac.com. I am thinking about a second home

ekar: forgive me for not responding to your email but there is a troll on this site so I would like to be cautious. Here is a list of short sales from a broker who actually gave me valuable info when I was looking. there is also a list of foreclosures on his site
http://idx.kevintomlinson.com/kt/listing/results/

I would also recommend the Canyon Ranch Resort. Lehman Brothers took it over from the developers at a low cost and should be negotiable. Plus there are some re sales by a few distressed buyers. It is a tremendous facility and I think that the CR brand will help it maintain it's value when the market rights itself a bit and sales pick up. It is a lifestyle that is differentiated from other properties on the beach. Lehman is already bankrupt so they are doing a good job of continuing the upgrades and upkeep -- they can't go bankrupt again so the just want to get their money back and the courts have been supportive. They will also provide financing. If you go with a resale, the non view apts are much better deals and there are so many public spots on the property that you don't really need a view in your apt. Prices on non view apts have gone for as low as $300 psf for a top grade building. And, the area is gentrifying through a long planned city plan.

Do you realize that a combination of psychographic targeting, geographic targeting, and probably google search narrows down who you are to usually less than a half dozen people, if that? Trolls abound everywhere. Be thankful it is obvious!

apt23: thanks for the link. canyon ranch looks great. but the cc seem very high. around $1400 for a 2 bedroom. whats the area like around there? can you walk to restaurants, shops?

The cc's include an allowance to use on food and spa services but I've forgotten how much. When I was looking the prices hadn't come down so far so it wasn't worth it to me at the time. I ended up buying a little further south but I know people who bought there and they love it.

The area is quieter than the raucous South Beach. The area is developing -- a new golf course, new organic market etc, a few but not many great restaurants. But I like it because you can get in the car (or cab) and in 10 mins be at the best places in either South Beach or Bal Harbor but you don't have to live in the tourist melee. And, Miami is fabulous. It is unbelievably international. Fantastic art, Michael Tilson Thomas symphony. Great music. Great diversity. Unbelievable food. Still working on theater but the dance is really developing. And the beaches in North Beach are beautiful, quiet and family oriented. If you are really interested, I can arrange for you speak with someone who lives there.